Minggu, 29 Januari 2012

End of the private property "bull run"? (Part 1)

Prices rises for private homes almost ground to a halt last quarter while rental increases also tapered off. The latest official data has sparked a discussion in property circles on whether the market has peaked.

Most observers say that either the peak has already been touched, or will be touched very soon.

The Urban Redevelopment Authority's benchmark private home price index inched up just 0.2% quarter-on-quarter (q-o-q) in Q4 last year, its ninth consecutive quarter of moderation. For the full year, the index's 5.9% rise was a third of the 17.6% gain registered in 2010. The figures were identical to flash estimates released on Jan 3.

And for the first time since Q3 2009, the increase in URA's landed property sub-index was lower than that for the non-landed property sub-index. The landed sub-index rose just 0.1% q-o-q in Q4 2011, compared with 0.3% for the non-landed sub-index. In fact, for semi-detached houses, the price index actually fell 0.6% q-o-q in Q4.

" In that quarter, prices of semi-detached houses in the east fell 1.6% while those in the north-east softened by 1.3%. This shows that some segments of the landed market are facing stronger price resistance," says Credo Real Estate executive director Ong Teck Hui. " However, landed prices have risen 80% from the market trough in Q2 2009, outperforming the 48% increase for non-landed for the same period."

URA's overall rental index for private homes rose 0.4% q-o-q in Q4, or half the 0.8% rise it had posted in Q3. Full year 2011, the index was up 3.8% - a fraction of the 17.9% gain it had put on in 2010.

The outlook for private home prices look bleak. CBRE predicts a price drop of 5 - 15% this year, with luxury/prime properties taking the bigger hit and mass-market homes being the least affected.

Credo's Mr Ong says: " It's difficult for prices to regain momentum as the recently imposed ABSD (additional buyer's stamp duty) and the economic slowdown could ease demand. Sustained supply and competition among sellers will also keep a lid on prices."

Giving a different take, Savills Singapore research head Alan Cheong said: " We still believe it's difficult to conclude if we've reached an inflexion point, if any at all."

Mr Cheong cites the oligopolistic nature of the Singapore residential property market, with large developers with deep pocket who're likely to resist any price cut. " A cocktail of low interest rates till at least late-2014 (as pledged by the US Federal Reserve) and higher inflation will in due course reignite another round of interest in the residential market as it's deemed a good hedge against inflation," he said.

Credo's Mr Ong paints two scenarios. "In the best-case scenario, if the economic slowdown is milder than expected, then buying sentiment may remain positive, translating to sustained buying activity which will help to keep prices stable amid the build-up in supply. In the worst-case scenario, if there's a recession, we can expect demand to slacken, creating downward pressure on prices."

Lamenting the difficulty in making accurate predictions, Knight Frank chairman Tan Tiong Cheng said: "Each time after the government has announced cooling measures in the past two years, I thought the measures would be sufficient to cool the market. But things have turned out to be otherwise."

He admits the ABSD will have some effect in curbing investment and foreign demand for private homes. " Prices will come down - but to what degree before they go up again? What's the alternative for people with savings? Where should they put their money? If you believe in the longer term, property is as good a bet as any. After all, interest rates are expected to stay low for the next couple of years."